Strike has knocked economy to its knees – by Ntsakisi Maswanganyi and Karl Gernetzky – THE country’s costliest and longest strike brought the economy to its knees in the first quarter. Some economists are warning of a recession as there is still no end in sight to the 18-week wage strike on the platinum belt. It has now spilt over into the second quarter, with mines in Rustenburg crippled in April and May. That spans the first two months of the second quarter, strongly suggesting that economic data for the period will disappoint. These factors, coupled with constraints such as disruptions to the electricity supply and a slow roll-out in infrastructure spending, are weighing on growth. A recession is defined as two consecutive quarters of contracting economic growth. South Africa’s last recession, caused by the aftershocks of the global financial crisis, was in 2009. A 24.7% contraction in mining and quarrying — the biggest contraction in almost 50 years — saw economic growth falter in the first quarter. Manufacturing also fell. Seasonally adjusted and annualised gross domestic product (GDP) fell 0.6% in the first quarter compared with a 3.8% increase in the fourth quarter of last year. The declines in mining and manufacturing were not surprising given the continuing strike at platinum mines. Weak economic growth means South Africa will take longer to reach the growth rates needed to make a dent in unemployment. It also suggests that lower revenue will be collected, which would delay a narrowing in the budget deficit. The country’s economic growth and development framework — the National Development Plan (NDP) — views economic growth of more than 5% per year as adequate to reduce unemployment to below 10% by 2030. Renaissance Capital economist Thabi Leoka said a recession was possible given that the strike had not yet been resolved. Even if we do get a resolution, we are now in May and it will take some time before full production levels resume, she said. Econometrix chief economist Azar Jammine said a recession was only possible if the strike at platinum mines continued for the rest of the year. Dr Jammine said a recession was unlikely if the strike were to be resolved this month or next. Impala Platinum spokesman Johan Theron said on Tuesday that it would take about three months to reach pre-strike production levels. Underground employees may be unfit or malnourished and they could require medical screening and treatment. Returning mine workers would also need to undergo a safety and production protocols induction before being able to go back underground, he said. It would take about a month to get them ready to go back underground. Rebuilding mine production to prestrike levels takes longer. It would take at least three months to get to 90% of full production. Mining equipment would need to be re-engaged, while the producers might need to find new suppliers and contractors to replace those who went bankrupt, or work with and assist existing companies, Mr Theron said. Newly appointed Mineral Resources Minister Ngoako Ramatlhodi has made ending the four-month strike the first priority of his ministry. He said on Tuesday he would begin seeking ways to help facilitate an agreement. He is set to start on a series of consultative engagements in the sector to ensure business and labour pull in the same direction for a sustainable mining sector. A process of mediated wage talks under the auspices of the Labour Court continues, but parties have given no public indications of their progress. Ms Leoka said plans to grow the economy, such as those in the NDP could take longer to implement given that it could be some time before some new ministers settle into their new positions. President Jacob Zuma announced a new Cabinet on Sunday night. Standard Chartered head of Africa research Razia Khan said the latest economic data showed that microscale reforms and a resolution to the platinum-sector strike were now even more of an imperative for South Africa. In their absence, growth might continue to languish at these weak levels, she said. Mining and manufacturing have close links given that many of the platinum group metals are used in the manufacture of goods such as vehicles. Manufacturing fell 4.4%, resulting in a -0.7 percentage point contribution to GDP. Statistics South Africa executive manager for national accounts Gerhardt Bouwer said the contraction in manufacturing should not only be attributed to the platinum strike. The negative growth does not only come from … the strike. Gold also did very poorly (due to) factors like safety stoppages, Mr Bouwer said. The weak first-quarter economic growth numbers are expected to cause downward revisions to economic growth forecasts for the year. The Reserve Bank has already revised down its economic growth forecast for this year to 2.1% from 2.6%. The Treasury is also likely to revise down its 2.7% economic growth forecast for this year when Finance Minister Nhlanhla Nene tables the medium-term budget policy statement in October. The latest figures also support the Reserve Bank’s recent decision to leave interest rates unchanged to support economic activity. Article published with the kind courtesy of bdlive.co.za
Posted on: Wed, 28 May 2014 06:35:33 +0000
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